AFM Regulation for Forex in the Netherlands
Forex trading has taken off as a popular form of investment all over the world. However, there are a number who still frown on such a risky way of investing, and even somewhere it is completely prohibited. The Netherlands was one country which started off a bit skeptically, but Forex trading has now gained acceptance. There is no one single regulatory body which oversees the whole industry. Instead, it is left to individual countries to set in place their own regulatory practices. Some countries are better than others, but most achieve a certain basic standard. The organization in charge of regulating financial markets and Forex brokers in Holland is the Autoriteit Financiële Markten or AFM. The Netherlands Authority for the Financial Markets (AFM) recognizes Forex as a legal way to invest and issues licenses for local brokers as well as offshore companies that wish to offer services to Dutch Forex traders.
How Forex brokers in Holland are regulated
The AFM keeps a list of AFM regulated brokers which includes the names and details of all investment brokerage firms. It is a simple list to access for anyone looking for licensed Forex brokers in the Netherlands. There is a search option which can be used to confirm whether a broker is regulated and you’ll be pleased to know there are a number of AFM Forex brokers to choose from. The AFM requires licensed firms to comply with certain financial reporting requirements which require the submission of reports to the Authority on a regular basis. The reports must include certain aspects of the business including trading data and trading volume. Should an AFM Forex broker fail to comply with the rules it faces sanctions, warnings, withdrawal or cancellation of the license, fines, and even criminal prosecution. One aspect for offshore Forex brokers is the requirement to establish local branches for which there must be an AFM license. This has to be done before the offshore company is able to offer services to traders in Holland.
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An introduction to the Netherlands Authority for Financial Markets
In Dutch, it is known as the Autoriteit Financiële Markten, but outside of the Netherlands it is better known as the Netherlands Authority for the Financial Markets. It was established in 2002 and took over the responsibilities of the Securities Board of the Netherlands. The legislation passed which created the Authority also served to increase its responsibilities. This meant all financial products were added to its remit including accounting, insurance, loans, savings, and investments. The Minister of Finance is politically responsible for the AFM, but it is an autonomous organization. In other words, it is able to act alone based on the powers given to it by the Minister of Finance. The aims of the AFM are:
- To make financial markets more accessible for everyone
- To promote confidence in the financial markets
- To allow for the smooth operation of all participants in the financial markets as well as the markets themselves
The AFM has close ties with international organizations
As a member of the Committee of European Securities Regulators, it actively contributes to harmonizing financial regulation in Europe. And as a participant in the International Organization of Securities Commissions (IOSCO), it helps to bring together securities regulators from more than 80 different countries. It is also an active participant in the Euronext stock exchange, but you may not have heard of this so let’s explain.
What is Euronext?
Euronext NV is a European stock exchange which is seated in London, Lisbon, Paris, Brussels, and Amsterdam. It provides a number of different services including market solutions, custody and settlement services, and a range of available products. These include exchange-traded funds, equities, certificates and warrants, derivatives, commodities, indices, and bonds.
What you can do if you are unhappy with your AFM regulated broker
There are a number of avenues you can explore if you are unhappy with the services of your AFM regulated broker.
Step 1 – Write a letter of complaint to the AFM licensed broker explaining the problem, and send a copy to the AFM. AFM rules and regulations include the requirement for a licensed entity to have a complaints procedure in place. You should be able to find individual procedures in the general conditions or the contract of the financial product. If you aren’t satisfied with the offered resolution the next step is to contact Kifid.
Step 2 – if you are unhappy with the providers answer you can write a letter to the Financial Complaints Tribunal (Kifid). There are other disputes agencies in the Netherlands, but Kifid is the only one recognized by the Minister of Finance. Kifid is made up of the Financial Services Ombudsman and the Financial Services Disputes Committee. The Ombudsman will first try to mediate, which is a free of charge service. But should the judgment be unsatisfactory it is possible to apply to the Disputes Committee for its decision. This service will cost €50.
Step 3 – if the Complaints Tribunal is unable to handle your complaint you have the option of applying to the courts.
Step 4 – your final option is to contact the AFM’s Financial Markets Information Line.the AFM is able to instigate an investigation if a financial undertaking has broken AFM rules. If required it will liaise with the undertaking, revoke its license or impose a fine. The AFM isn’t able to mediate on your behalf or determine whether your complaint is well-founded. Kifid or the courts are where you should go if this is what you require. The AFM will not inform you whether an investigation will be conducted but it will inform you if your complaint leads to a publication.
You should always consider a regulated broker as your partner because it will offer you much more protection and a much fairer trading environment than an unregulated broker. For those of you looking to trade Forex in the Netherlands look for a broker holding an AFM license.